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Below is a list of 10 seasonality trends that can be found in the UK stock market-

Sell in May – This extraordinary effect remains as strong as ever: since 1982 the market in the winter months has out-performed the market in the summer months by an average 8.8 percentage points annually.

January effect – Performance in January tends to be inversely proportional to company size (i.e. small cap companies out-perform large-caps).

Construction sector – One of the most well-known seasonality trends is the out-performance of the construction sector in the first quarter of the year (in fact the sector’s strong period today is more likely to be the three-month period Dec-Feb).

Month of the year – April and December are the strongest months in the year for the stock market, while May, June and September are the weakest.

Day of the week – Wednesday is the new weakest day of the week (Monday used to be), and the strongest days are now Tuesday and Thursday.

Turn of the month – The market tends to be weak a few days either side of the turn of the month, but abnormally strong on the first trading of the new month (except December).

Holiday effect – In recent years the market has been significantly strong on the days immediately before and after holidays and weak fours days before and three days after holidays.

FTSE 100 v S&P 500 – Although since 1984 the S&P 500 has overall greatly out-performed the FTSE 100 (+1021% against +575%), there are months in the year when the FTSE 100 fairly consistently out-performs the S&P 500.

A long list of questions could be compiled to which the simple answer is no. A good source for such questions is headings from the UK newspaper, the Daily Mail (e.g. Are we all going to die next Wednesday?). Another good source is academic papers. In one paper below the implicit question is: are stock returns affected by ghostly legends? Short (and long) answer: no. Another paper finds a correlation between a country’s linguistic diversity and stock market trading volumes. Perhaps this simply results from the number of trades that have to by reversed following language confusion: “I thought you said buy?”, “No, I say sardine!”

A strong contender for the Paper in Poor Taste Award would be the one below looking at the influence of sudden celebrity deaths on the stock market (the inclusion of the word “sudden” in the title will no doubt be appreciated by the judges of this award). John Kay recently wrote an excellent article about the wisdom of crowds (The parable of the ox); appearing here is a paper that tackles the same topic but in a rather left-field context. The paper finds that the price movements of tourism stocks on the Tel Aviv Stock Exchange more accurately forecast the success of ceasefire agreements in the Levant than did editorials in the Jerusalem Post and New York Times.

How is your well-being? The authors of a paper here believe it (that is, your well-being) is affected by the stock market and that the government should do something about it. And if the government doesn’t do something about it, this other paper reckons we’re all going to the loony bin.

Finally, nomination for one of the creepiest papers must go to the one here that found that when CEOs are away from their headquarters companies announce less news than usual. Fair enough, but to analyse this the author identified CEO absences by “merging corporate jet flight histories with records of CEOs’ property ownership near leisure destinations”. We’ve had shareholder activists, are we now to see the rise of shareholder stalkers – would-be analysts hiding in the bushes with binoculars checking on the holiday timetables of CEOs?

Anomalies in Finance: Superstition in the Italian Stock MarketAuthors [Year]: McGuckian, Fergus J [2010]Journal [Citations]: Abstract: The efficiency of global financial markets has long been a topic of contention for both academics and industry professionals alike. Evidence suggests that most of the time, asset markets do a good job of correctly processing and assimilating information into prices. However, a substantial literature has built up proof which indicates that this is quite often not the case. A wide variety of anomalies and so called ‘effects’ have been documented revealing stock price behaviour that is inconsistent with the predictions of traditional models. These inconsistencies illustrate departures from theory and are unexplainable within the mainstream economics paradigm; conversely, many anomalies can be accounted for using explicit insights from behavioural finance. This study discusses the theoretical debate and investigates whether financial markets are affected by superstition and if so, if this is reflected in asset prices. A new discovery is added to the literature, namely the Friday 17th anomaly; with regard to the Italian MIB Storico index results indicate that in comparison to regular Fridays – which are aggregately positive – returns for Friday the 17th are four times larger and statistically different.Ref: AA469

Ghostly Traditions and Market PerformancesAuthors [Year]: Yang, Der-Yuan and Andy Chien [2013]Journal [Citations]: Abstract: Old traditions never die; they just fade away. However, some are still deeply embedded in our life and practiced every day. This paper examines some notable Taiwanese ghostly legends, testing their potency on the stock markets. The results show that though some ancient beliefs still carry heavy weight in our daily life ostensibly, their impact on the stock market has been negligible. To be sure, some of the customs of our ancestors may have lingered around long er than expected, but contrary to our expectations, their spirits have languished, showing no vigor as financial guidance.Ref: AA485Continue reading →